Options Trading News: Currency Options Traders Await the New Year

Currency Options Sink as Options Trading Investors Close the Books

(Wall Street Journal)

Currency option prices are sinking as investors and traders close out their books for the year. Moreover and a week ago, the currency market’s “fear” gauges were dropping – making options prices more volatile on lower trading volumes.

Hedge funds and other money managers were loading up on currency options to bet on Europe’s debt crisis along with the global economy for months now but it appears that they plan to sit out the holiday season. In fact, investors are selling currency options while their bankers are taking the opposite side of the trades in order to shield themselves from potential currency market volatility.

However, investors and traders alike could just as easily jump back into currency options trading should someone pull a trigger with the most likely trigger being a downgrade of a European country or some. Cash could just as easily be invested in European bonds – which could steady the Euro.

Nevertheless, any sudden or violent move by the Euro could just as quickly make currency options more attractive.

In addition, the euro has already fallen to its weakest level against the dollar since January plus its poised to fall further as options trading investors loose whatever confidence was left in the ability of European leaders to contain the their debt crisis.

Options Trading Ideas: Copper

(Bloomberg Businessweek )

Copper traders are now the most bullish since October as global copper inventories hit a two-year low – adding to signs that copper demand is improving. On other hand, hedge funds and other money managers continue to be bearish.

Specifically, the “smart” money crowd are holding a net-short position of 3,390 US futures and options. Moreover, copper speculators have held a net-short options trading position since mid-September – the longest stretch since July 2009 and just one month after the last US recession officially ended.

In addition, sixteen of the 28 analysts surveyed by Bloomberg expect copper to advance next week for the first positive outlook in three weeks while global copper stockpiles fell 22% since March to reach their lowest level since October 2009.

Moreover, one analyst has pointed out that reported copper inventories have been very aggressively declining and there are indications that the market is still tight. Hence, this analyst predicted that copper will have decent, albeit unspectacular, growth rates.

Nevertheless, copper is still down 25% from a record $10,190 a metric ton in February to the $7,613.25 level on the London Metal Exchange plus its on track to have its first annual drop since 2008. On the other hand, Goldman Sachs forecasts copper to trade at $9,500 in the next 12 months while Barclays expects a 234,000-ton shortage next year resulting from a 2.5% increase in consumption.

Bearish Options Trading on Oracle (ORCL)

(Forbes)

Oracle (ORCL) sank after missing analysts expectations. Moreover, some options trading investors were buying puts in anticipation of further losses ahead of the holidays.

Total options trading volume on Oracle (ORCL) surpassed 205,000 contracts by the half day mark after earnings were reported as traders jockeyed to enter post-earnings trading positions. Some options trading investors were taking out bearish trading positions in anticipation of more losses while others staked out more optimistic ones on the belief there will be a recovery.

However, one options trading investor appears to have guessed correctly before Oracle (ORCL) released its earnings by selling 16,500 long-dated Jan. 2013 $35 strike calls late in November to collect a $2.62 premium when shares were trading at $29. With 16,500 calls purchased after earnings were announced, this options trading investor was able to exit his or her bearish trading position with with net profits of around $1.58 per options contract.

Options Trading Ideas: Getting Bullish on Tobacco

(Forbes)

During the week, Altria Group (MO) hit a three year high of $29.63 with bullish call options trading activity. This means that options trading investors believe that Altria Group (MO) has room to make further gains in 2012 – especially after the company announces fourth-quarter earnings on January 26.

Options trading volume on Altria Group was at its heaviest at the Feb. 2012 $31 strike price where at least 3,000 calls traded and were mostly bought at an average premium of $0.16 apiece.

In addition, Philip Morris International (PM) shares were also rallying but one big options trade in February 2012 calls may not be a bullish call. Specifically, 3,000 Feb. 2012 $80 strike calls were purchased on Philip Morris appears to be tied to the sale of stock in a trading position that would be profitable if PM were to decline.

Options Trading on Harley-Davidson (HOG)

(Schaeffer Investment Research)

Put traders were showing a strong interest in Harley-Davidson (HOG) earlier in the week with around 4,200 put options being traded – 14 times HOG’s expected intraday volume.

Specifically, more than 4,000 puts were traded at the out-of-the-money January 2012 30 strike at the bid price. This points to seller driven trading activity.

However and if the puts were being sold to open, that would mean that traders are betting that Harley-Davidson (HOG) will stay above the $30 level when January options expire.

Nevertheless, a majority of analysts following Harley-Davidson (HOG) are optimistic toward the stock with 10 “buys” or better ratings verses five “holds” and no “sells.” Options trading investors should also note that Harley-Davidson (HOG) has gained around 11% since the start of the year.

Category: Options Trading